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May 10, 2017

Draghi confident in EU growth, gains time before tapering off

Draghi confident in EU growth, gains time before tapering off

It is too early for the ECB to declare a victory in the battle for accelerated prices growth in the eurozone, despite compelling indications of a more sustainable economic pickup of the block, ECB President Mario Draghi stated on Wednesday.
Draghi words confirm he tends to stick to deliberate path of raising rates and gradual cleaning of 2.3B euro balance sheet, despite the pressure from wealthy part of EU, particularly the Netherlands and Germany.

However, he hinted on a possible language upgrades on next meeting and retreat from the regulator’s statement on ultra-easing monetary policy. “The incoming data confirm that the cyclical recovery of the euro area economy is becoming more stable, and the downside risks continue to ebb,” he said. “However, it’s too early to talk about success. Inflationary pressure remains subdued and has not yet shown a convincing upward trend. ”

It is expected that in June the ECB will slightly change the language, reflecting the improvement of the economic situation, but will stand pat on monetary policy.

Draghi noted that the ECB has no plans to change the terms of QE in order to avoid the risk of losing the opportunity to buy sovereign debt of some countries due to their shortage, despite the calls for tapering off from the management officials.
Draghi said that the advantages of ECB monetary incentives outweigh the drawbacks, but expressed concerns over the rise in property prices and high level of household debt in a number of countries.

Oil “Big Jump”

Oil futures surged on Wednesday during american session to an intraday high after surprising cutback of oil reserves in US, as EIA report showed. The weekly report from the Energy Information Administration of the US Energy Ministry (EIA) reported that US crude inventories fell 5.2 million barrels per week ending May 5.
Market analysts expected a decline in crude oil reserves of about 1.8 million barrels, but on Tuesday API anticipated a 5.8 million barrel drop in inventories, quite close to the EIA estimate.

On Tuesday, WTI benchmark fell by $0.55 amid fears that the surge in output of US shale producers neutralize the efforts of other producers figuring out a balancing act to bring oil market to the equilibrium.
In recent weeks, oil prices have remained under pressure amid fears of an increase in US oil production, which has shaken investors’ confidence that OPEC is able to restore balance in the market. Although according to sources familiar with the matter, OPEC countries and outside OPEC are discussing the possibility of extending the agreement to prolong production cuts for another six months to balance the situation on the market.

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